Getting What They Deserve

LISBON, Portugal – Portugal's Social Democrats unseated the Socialist government in an emphatic election victory Sunday, giving the center-right party a strong mandate to enact a grinding austerity program demanded in return for a euro78 billion ($114 billion) international bailout.

Though the severe debt-reduction measures are expected to pitch the country into deep recession and bring sharply lower living standards in what already is one of western Europe's poorest countries, parties that support the effort to restore fiscal health collected around 80 percent of the vote.

That outcome is reassuring for European leaders keen to draw a line under the continent's debt crisis which they have battled to vanquish for more than a year, especially as Greece's financial woes continue to worry investors.

I always find it odd when people vote contrary to their own well being. It truly is perplexing. In the case of Portugal, they KNOW it's going to wreck their nation's economy for a very long time.

The Europeans have been trying the "austerity" thing for a while now, and it's not turning out very well for them. Instead of trying what the commie leftists have been arguing, they're doubling down.

It's pretty simple - when the problem is a lack of demand, you compound the problem when you severely cut the only spending that can be done, that by the government. As Krugman keeps saying over and over, that lesson was learned not more than 80 years ago, and it seems like everyone has forgotten how the US depression was ended.

Still - the reason why the people in power are pushing for these austerity measures is because.. say it with me class.. wealth is relative.

If you're wealthy in Portugal, your wealth compared to the rest of the nation is going to expand under difficult economic conditions. That's why it's trying to be pushed here in the US - and is why I'm less stressed about it then if I were like the vast majority of Americans that live paycheck to paycheck.

By American standards, we're well off. By world standards, we're fucking rich as hell. We could probably buy a massive mansion with a scenic ocean-side view in Mexico, and staff it with 10 near-slaves and simply retire in glory.. assuming the locals didn't rob us and kill everyone.. but whatever.

The point is.. what is going on in the world right now is a very serious attempt to widen the wealth gap. In previous economic down turns, inflation has been an issue, which causes heart burn for wealthy people because your wealth loses value under high inflation. There is not much inflation now, because inflation requires demand to drive it. However, if you were interested in the well being of most of your citizens, you'd want an inflation target of around 5% or so.

One side effect is that inflation devalues debt. For example, if your debt was $100. With 5% inflation, that value of that debt would drop 5$ in a year. While it's true your buying power, in general terms, would also be 5% less - if you don't have much to spend anyway, that wouldn't matter. That would only affect the wealthy that are buying things regardless. If you're interested in reducing personal debt, inflation is a great way to do it.

The way to fix the economic situation of debt laden nations is to have governments spend more to increase demand, which increases production, which reduces unemployment. Follow that with increases in inflation and in a much quicker time frame, economic conditions will improve drastically. Then, when unemployment drops, and tax revenues increases, and governments can't start dialing down the spending gradually to balance the budgets.

That's why American Liberals argue that simply loading up helicopters with cash and dropping it over American cities would be a much more effective means of ending the high unemployment than "austerity". It's framed as a helicopter drop as sort of a joke, but it really would work better than what is going on now.

Additional stimulus is not what is going to happen... which is why I constantly encourage people to save money, earn as much as you can, and separate yourself from the class of citizens who are going to be well and truly fucked..

By the way.. that 114 billion dollar "bailout" for Portugal.. is almost exactly the cost to the US taxpayers of the war in Afghanistan for one year. Add in the cost of Iraq.. Libya.. defense in general.. and you can see why the United States has issues.

The only real question is if all of this is by design, or just circumstantial.. or tangentially related things. If there is some sort of world-wide conspiracy to fuck up economies the world over in order to expand income disparity, that would be pretty god damn ballsy. It took a lot of corruption by the wealthy to cause the problem in the first place, but to then inflate the success of that massive theft by reducing the wealth of the middle class and the poor is just stunning.. if done intentionally.